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【Decoding a Rejected Claim】Paid premiums for critical illness insurance but no payout? How can policyholders protect themselves?
Case A: Person A took out critical illness insurance and told the insurance agent that she had suffered from anaemia during pregnancy. However, the agent said that anaemia was very common and did not need to be declared, so Person A successfully obtained cover. About a year later, Person A was diagnosed with blood cancer. When she made a claim, the insurance company rejected it on the grounds that she had failed to disclose her medical history…
Case B: Before taking out critical illness insurance, Person B underwent a medical examination arranged by the insurance company. In the insurance application, he answered that he had previously suffered from heart and vascular disease, giving hypertension as the details, and was nevertheless accepted for cover. About a year after taking out the policy, Person B was diagnosed with stage-four prostate cancer and made a claim to the insurance company. However, the insurance company believed that Person B had failed to declare his heart disease and previous medical examinations, and therefore rejected the claim. Person B was aggrieved. He believed that, as he had undergone a medical examination arranged by the insurance company before taking out the policy, the insurance company should have known his medical history and should not have rejected the claim…
Undoubtedly, paying for insurance but receiving no payout is a policyholder’s nightmare. In the above cases, the insurance companies rejected the claims on the grounds that the policyholders had failed to disclose their previous medical histories. Insurance contracts are based on trust. The principle of “Utmost Good Faith” means that policyholders must truthfully, fully and accurately disclose to the insurance company all important facts (Material Fact) relevant to the insurance, such as their medical history and pre-existing illnesses, because these important facts directly affect whether the insurance company will provide cover, impose exclusions or charge an additional premium.
Legally, policyholders have a duty to declare important facts to the insurance company. But what constitutes an important fact? Policyholders naturally may not know. Does this mean that even a cold or flu must be declared one by one? In fact, policyholders should carefully understand the questions on the application form and answer them truthfully. In particular, when the questions are very broad, everyone should be especially careful when answering. For example:
- Question 1: In the past five years, have you suffered any accident or illness that has not been mentioned above?
- Question 2: Have you ever undergone any tests (including X-rays, electrocardiograms, blood tests, biopsies, ultrasounds, mammograms or cervical cytology tests, etc.)?
When faced with such sweeping questions, how likely is anyone to answer “No”? For Question 1, unless you have not been ill at any time during the past five years, you have an illness to declare. As for Question 2, the question asks whether you have “ever undergone any tests” and imposes no time limit, making it even more difficult to answer “No”. Think about it: if you were born normally in a hospital, you would at the very least have had a blood test. Over the course of a lifetime, the opportunities to undergo medical tests only increase. When an insurance company asks such a question, the policyholder may need to list in detail all the tests they have undergone and their results.
Although disclosing your medical history in detail may lengthen the underwriting process and could even result in exclusions, an additional premium or a refusal of cover, this is still better than having a claim rejected and suffering a major unexpected loss. In reality, policyholders usually rely on insurance agents to tell them how to make their declarations, as in the case of Person A, whose agent told her that she did not need to declare her anaemia. This also creates a potential conflict of interest. Some agents may want to complete applications quickly and avoid complications, and may therefore deliberately tell policyholders not to declare certain illnesses. However, even if the policyholder was led to omit medical history, they ultimately signed the application form. If a dispute arises over a claim, they will be at a significant disadvantage, even if they lodge a complaint with the Insurance Complaints Bureau (ICB).
As for Person B, he believed that, since he had undergone a medical examination arranged by the insurance company when applying for cover, the insurance company should have understood his medical condition before accepting the application and should not have waited until a claim was made to investigate it. In fact, when you purchase critical illness insurance, you have already signed an authorisation allowing the insurance company to check your medical history, and the insurance company has the right to decide when to conduct such checks. Sometimes, an insurance company does not investigate your medical history during underwriting and only does so when you make a claim. Furthermore, each insurance company has its own underwriting and claims guidelines. There is a saying in the market that some companies are “lenient in underwriting but strict in claims”, while others are “strict in underwriting but lenient in claims”; however, there is no data to substantiate how accurate this is.
It is also worth noting that, in both cases above, the claims were made approximately one year after the policies were taken out. Insurance companies will usually investigate such early claims particularly rigorously to determine whether the insured person failed to disclose their medical history or had a pre-existing illness. If, when assessing a claim, the insurance company discovers that the insured person failed to declare an important fact and therefore rejects the claim, the insurance company will generally rescind the entire contract (commonly referred to as a “VOID” policy) and refund the premiums paid to the policyholder, as if the contract had never existed.
People buy insurance simply to gain peace of mind. Many rejected claims arise from medical histories being completed incorrectly. Policyholders should therefore carefully understand the questions, answer them truthfully, review their answers before signing, and make good use of the 21-day cooling-off period to gain a deeper understanding of the policy and the documents they have signed.
If you have any questions about applying for, underwriting, cover or claiming under critical illness insurance, you can ask your question anonymously on the 10Life website and receive immediate replies from multiple licensed advisers.
The cases in this article were taken from an interview on Television Broadcasts’ 《東張西望》 programme, which was broadcast on 19 November 2019.
This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.
10Life Editorial Team
Our team of professional content researchers focussing on insurance
10Life Editorial Team
Our team of professional content researchers focussing on insurance
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